Loss in the Millions in Real Estate Investments 

Interestingly, readers will realize the big losses are in Orchard area, noticeably the high quantum properties.  The question today is why?

A check with IRAS income statement of Singaporean earners, the top 10% earners average $20,000 a month.    These people will not be able to afford properties worth of $5 million and above.  So we are talking about top 5% earners in Singapore who are able to afford and probably only the top 1% can afford properties worth above $10 millions.  So what do these figures tell us?

It tells us that the market for such properties is very small and it puzzles me for a long time why would so many developers want to build high end properties?

Economic tells us that when supply is more demand, prices will fall.  When the Additional Buyer’s Stamp Duty (ABSD) hit the property market since 8 December 2011, the high end property market kept trending down with no respite in sight.  Prices were peaked in 2007 and kept trending down since subprime problem emerged in US in 2008 resulting in Lehman Brothers crash and this high end condo market had suffered tremendously.  All eyes are on Singapore government to end the pain with hope rising that government may soften its stand on ABSD.

This soft property market has taught everybody something:

To the developers: not to be too bullish about high end condos

To the speculators:  there is no place for speculation in real estate in Singapore

To the buyers : to look beyond the beautiful showflats and to expect to hold for long term in real estate in Singapore.

To everybody : the days of making big and quick bucks in residential real estate in Singapore is over.   Nobody should ignore fundamentals in investments.  Some are still playing the commercial real estate as there is no absd or ssd (seller’s stamp duty) but let every buyer beware that low yields will kill ultimately at the end.

8 May 2015 

 

Copyright © Tracy Goh 2015

 

 

 

 

 

 

 

 

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